World Bank lowers its 2016 crude oil forecast to USD 37 per barrel

WASHINGTON, Jan 26 (KUNA) — The World Bank lowered its 2016 forecast for crude oil prices to USD 37 per barrel on Tuesday from USD 51 per barrel in October, in its latest Commodity Markets Outlook.
The lower forecasts reflects, “sooner-than-anticipated resumption of exports by the Islamic Republic of Iran, greater resilience in U.S. production due to cost cuts and efficiency gains, a mild winter in the Northern Hemisphere, and weak growth prospects in major emerging market economies,” said a statement on the outlook.
Oil prices fell by 47 percent in 2015 and are expected to continue its decline on average by another 27 percent in 2016. From their current lows, a gradual recovery is expected over the course of the year for reasons, the report explained. The sharp oil price drop does not appear “fully warranted” by drivers of oil demand, it said. Additionally, oil producers are expected to sustain “persistent losses” and make production cuts that are “likely to outweigh any additional capacity coming to the market.” Finally, demand is expected to strengthen “somewhat with a modest pickup in global growth,” the World Bank projects.
“The anticipated oil price recovery is forecast to be smaller than the rebounds that followed sharp drops in 2008, 1998, and 1986,” it said.
“Low prices for oil and commodities are likely to be with us for some time,” said Senior Economist and lead author of the Commodities Markets Outlook John Baffes in a statement by the World Bank. “While we see some prospect for commodity prices to rise slightly over the next two years, significant downside risks remain.” (end)